Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale.

During 2018, Citation began construction of an office building for Altamont Corporation. The total contract price is $25 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows:

Also during 2018, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $900,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2018 and paid for in full for $900,000 each by the buyers. The completed homes cost $675,000 each to construct. The construction costs incurred during 2018 for the nine uncompleted homes totaled $4,050,000.

Required:

1. Which method is most equivalent to recognizing revenue at the point of delivery?
2. Answer the following questions assuming that Citation uses the completed contract method for its office building contracts:
2-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?
2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?
2-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)
3. Answer the following questions assuming that Citation uses the percentage-of-completion method for its office building contracts.
3-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?
3-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?
3-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)
4. Assume the same information for 2018 and 2019, but that as of year-end 2019 the estimated cost to complete the office building is $11,250,000. Citation uses the percentage-of-completion method for its office building contracts.
4-a. How much revenue related to this contract will Citation report in the 2019 income statement?
4-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2019?
4-c. What will Citation report in its 2019 balance sheet related to this contract? (Ignore cash.)
5. Which method of accounting should Citation Builders, Inc adopt for its single-family houses?
6. What will Citation report in its 2018 income statement and 2018 balance sheet related to the single-family home business (ignore cash in the balance sheet)?

I am interested in 4 c

Southern Glass manufactures glass bottles for a variety of products, including perfume bottles and liquor bottles. The company has two profit centers: production and labeling. The production department melts the raw materials, adding metal oxides to produce different colors if desired. It then uses a continuous rolling process to shape the bottles. Production then transfers the bottles to the labeling department at an average cost of $15 ($12 variable; $3 fixed) per case. The labeling department then paints or attaches labels on the bottles at an additional fixed cost of $1 and sells the labeled bottles on the external market at an average price of $30 per case.

Recently, a regional liquor manufacturer contacted the manager of the production department about purchasing ¼ of the 250,000 cases Southern Glass plans to make in April. The company would like production to start making their specially shaped bottles. They are willing to pay $28 per case. Making the special bottles would not affect the production department’s cost but it would require cutting current bottle production by ¼; therefore, the labeling department would only label and sell 187,500 labels in April.

(1) Will the production department prefer to sell all 250,000 cases internally or sell ¼ (62,500) cases to the liquor manufacturing and ¾ (187,500) to the labeling department?

(2) Will the labeling department prefer to purchase all 250,000 cases internally or allow production to sell ¼ (62,500) cases to the liquor manufacturing?

(3) Will company profits be maximized if the production department sells all 250,000 cases internally or sells ¼ (62,500) cases externally and ¾ (187,500) internally?

(4) Why is there a goal congruence problem (hint: does everyone want the same option)?

(5) Provide one specific policy change that can solve the goal congruence problem illustrated in this example (at a minimum, there are three changes – you only need to provide one). How does your policy change solve the problem?

These tables must be filled out before the questions can be answered.

Production Department Revenues and Costs

Total Revenues and Costs for Southern Glass

*This profit should equal: production net profit + labeling net profit for option (1) in the first two tables

**This profit should equal: production net profit + labeling net profit for option (2) in the first two tables

Labeling Department Revenues and Costs

At June 30, 2017, the end of its most recent fiscal year, Bramble Computer Consultants’ post-closing trial balance was as follows:

The company underwent a major expansion in July. New staff was hired and more financing was obtained. Bramble conducted the following transactions during July 2017, and adjusts its accounts monthly.

Adjustment data:

The chart of accounts for Bramble Computer Consultants contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance. Prepaid Rent, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Notes Payable, Interest Payable, Income Taxes Payable, Salaries and Wages Payable, Unearned Service Revenue, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense, Advertising Expense, Income Tax Expense, Interest Expense, Rent Expense, Supplies Expense, and Utilities Expense.

Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale. During 2018, Citation began construction of an office building for Altamont Corporation. The total contract price is $22 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: 2018 2019 2020 Costs incurred during the year $ 4,400,000 $ 10,450,000 $ 4,950,000 Estimated costs to complete as of year-end 13,200,000 4,950,000 — Billings during the year 2,200,000 11,000,000 8,800,000 Cash collections during the year 1,980,000 9,620,000 10,400,000 Also during 2018, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $840,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2018 and paid for in full for $840,000 each by the buyers. The completed homes cost $630,000 each to construct. The construction costs incurred during 2018 for the nine uncompleted homes totaled $3,780,000.

Required: 1. Which method is most equivalent to recognizing revenue at the point of delivery?

2. Answer the following questions assuming that Citation uses the completed contract method for its office building contracts:

2-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?

2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?

2-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)

3. Answer the following questions assuming that Citation uses the percentage-of-completion method for its office building contracts.

3-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?

3-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?

3-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)

4. Assume the same information for 2018 and 2019, but that as of year-end 2019 the estimated cost to complete the office building is $9,900,000. Citation uses the percentage-of-completion method for its office building contracts.

4-a. How much revenue related to this contract will Citation report in the 2019 income statement?

4-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2019?

4-c. What will Citation report in its 2019 balance sheet related to this contract? (Ignore cash.)

5. Which method of accounting should Citation Builders, Inc adopt for its single-family houses?

6. What will Citation report in its 2018 income statement and 2018 balance sheet related to the single-family home business (ignore cash in the balance sheet)?

Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale. During 2018, Citation began construction of an office building for Altamont Corporation. The total contract price is $13 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: 2018 2019 2020 Costs incurred during the year $ 2,600,000 $ 6,175,000 $ 2,925,000 Estimated costs to complete as of year-end 7,800,000 2,925,000 — Billings during the year 1,300,000 6,500,000 5,200,000 Cash collections during the year 1,170,000 5,030,000 6,800,000 Also during 2018, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $680,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2018 and paid for in full for $680,000 each by the buyers. The completed homes cost $510,000 each to construct. The construction costs incurred during 2018 for the nine uncompleted homes totaled $3,060,000. Required: 1. Which method is most equivalent to recognizing revenue at the point of delivery? 2. Answer the following questions assuming that Citation uses the completed contract method for its office building contracts: 2-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements? 2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? 2-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.) 3. Answer the following questions assuming that Citation uses the percentage-of-completion method for its office building contracts. 3-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements? 3-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? 3-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.) 4. Assume the same information for 2018 and 2019, but that as of year-end 2019 the estimated cost to complete the office building is $5,850,000. Citation uses the percentage-of-completion method for its office building contracts. 4-a. How much revenue related to this contract will Citation report in the 2019 income statement? 4-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2019? 4-c. What will Citation report in its 2019 balance sheet related to this contract? (Ignore cash.) 5. Which method of accounting should Citation Builders, Inc adopt for its single-family houses? 6. What will Citation report in its 2018 income statement and 2018 balance sheet related to the single-family home business (ignore cash in the balance sheet)?

Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale.

During 2018, Citation began construction of an office building for Altamont Corporation. The total contract price is $13 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows:

itation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale.

During 2018, Citation began construction of an office building for Altamont Corporation. The total contract price is $10 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows:

Also during 2018, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $620,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2018 and paid for in full for $620,000 each by the buyers. The completed homes cost $465,000 each to construct. The construction costs incurred during 2018 for the nine uncompleted homes totaled $2,790,000.

Required:

1. Which method is most equivalent to recognizing revenue at the point of delivery?
2. Answer the following questions assuming that Citation uses the completed contract method for its office building contracts:
2-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?
2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?
2-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)
3. Answer the following questions assuming that Citation uses the percentage-of-completion method for its office building contracts.
3-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements?
3-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019?
3-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)
4. Assume the same information for 2018 and 2019, but that as of year-end 2019 the estimated cost to complete the office building is $4,500,000. Citation uses the percentage-of-completion method for its office building contracts.
4-a. How much revenue related to this contract will Citation report in the 2019 income statement?
4-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2019?
4-c. What will Citation report in its 2019 balance sheet related to this contract? (Ignore cash.)
5. Which method of accounting should Citation Builders, Inc adopt for its single-family houses?
6. What will Citation report in its 2018 income statement and 2018 balance sheet related to the single-family home business (ignore cash in the balance sheet)?

Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale. During 2018, Citation began construction of an office building for Altamont Corporation. The total contract price is $13 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: 2018 2019 2020 Costs incurred during the year $ 2,600,000 $ 6,175,000 $ 2,925,000 Estimated costs to complete as of year-end 7,800,000 2,925,000 — Billings during the year 1,300,000 6,500,000 5,200,000 Cash collections during the year 1,170,000 5,030,000 6,800,000 Also during 2018, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $680,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2018 and paid for in full for $680,000 each by the buyers. The completed homes cost $510,000 each to construct. The construction costs incurred during 2018 for the nine uncompleted homes totaled $3,060,000. Required: 1. Which method is most equivalent to recognizing revenue at the point of delivery? 2. Answer the following questions assuming that Citation uses the completed contract method for its office building contracts: 2-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements? 2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? 2-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.) 3. Answer the following questions assuming that Citation uses the percentage-of-completion method for its office building contracts. 3-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements? 3-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? 3-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.) 4. Assume the same information for 2018 and 2019, but that as of year-end 2019 the estimated cost to complete the office building is $5,850,000. Citation uses the percentage-of-completion method for its office building contracts. 4-a. How much revenue related to this contract will Citation report in the 2019 income statement? 4-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2019? 4-c. What will Citation report in its 2019 balance sheet related to this contract? (Ignore cash.) 5. Which method of accounting should Citation Builders, Inc adopt for its single-family houses? 6. What will Citation report in its 2018 income statement and 2018 balance sheet related to the single-family home business (ignore cash in the balance sheet)?

The comparative balance sheets for 2018 and 2017 and the income statement for 2018 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.

   
Additional information from the accounting records:

Investment revenue includes Arduous Company’s $6 million share of the net income of Demur Company, an equity method investee.

Treasury bills were sold during 2018 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.

A machine originally costing $70 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $17 million.

Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $3 million.

The preferred stock of Tory Corporation was purchased for $25 million as a long-term investment.

Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.

The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $82 million. Annual lease payments of $7 million are paid at the beginning of each year starting January 1, 2018.

$60 million of bonds were retired at maturity.

In February, Arduous issued a 4% stock dividend (4 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.

In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $9 million.

Prepare the statement of cash flows for Arduous Company. Use the T-account method to assist in your analysis. indirect method (Do not round intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.). Amounts to be deducted should be indicated with a minus sign.)

The comparative balance sheets for 2018 and 2017 and the income statement for 2018 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.

   
Additional information from the accounting records:

Investment revenue includes Arduous Company’s $6 million share of the net income of Demur Company, an equity method investee.

Treasury bills were sold during 2018 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.

A machine originally costing $70 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $17 million.

Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $3 million.

The preferred stock of Tory Corporation was purchased for $25 million as a long-term investment.

Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.

The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $82 million. Annual lease payments of $7 million are paid at the beginning of each year starting January 1, 2018.

$60 million of bonds were retired at maturity.

In February, Arduous issued a 4% stock dividend (4 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.

In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $9 million.

Required:
Prepare the T-accounts for Arduous Company. (Do not round intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.). Amounts to be deducted should be indicated with a minus sign